- Global dividends hit record $1.03 trillion in 2013, up $310 billion since 2009
- Emerging Markets doubled payouts between 2009 and 2011, but growth has since stalled
- Emerging Markets now make up $1 in every $7 of global payouts
- Euro crisis weighs on Europe ex UK – dividends up 8% to $199.8bn since 2009, but Europe is still second largest dividend payer after US
- US rises 49% in five years, and accounts for one third of the global total
Dividends paid by the world’s listed companies burst through the $1 trillion mark for the first time ever in 2013, according to the Henderson Global Dividend Index, a new quarterly report analyzing equity income from around the world.
Investors harvested $1.027 trillion of dividends during the year, an increase of $310bn since 2009. In that year, which marked a post-financial crisis low point for equity income, firms delivered $717bn to their shareholders. This dramatic growth means the Henderson Global Dividend Index (HGDI) reached 143.2 by the end of 2013 (100 marks the beginning of the series at the end of 2009).
Andrew Formica, CEO of Henderson said: “We have undertaken this research because we are seeing increasing calls from our clients for our range of international equity income products. The trillion dollar dividend is a huge milestone for equity investors and illustrates that dividends are now a vital component of investors' returns. The search for income is more than just a response to rock bottom interest rates in recent years. It marks a generational shift as ageing populations must increasingly rely less on state pensions and more on their own savings to provide for retirement. Not only that, but they will need to stay invested in equities much longer than in the past too. This demand for equity income is a trend we see continuing through 2014 and beyond."
Different parts of the world are producing very different results. By far the fastest growth initially came from Emerging Markets. Collectively, dividends from these countries have more than doubled since 2009 (+107%), up from $60.9bn to $125.9bn, an average annual growth rate of almost 20%.
The BRIC (Brazil, Russia, India and China) countries, which between them make up 55% of all Emerging Markets dividends, have grown a third faster than their peers in the last five years. However, after 2011, growth from Emerging Markets slowed to a crawl as the commodity cycle ended and currencies fell. Asia-Pacific grew its dividends 79% over the five year period.
By contrast, dividends from Europe ex UK moved ahead 8% since 2009 reaching $199.8bn in 2013. It is still comfortably the second most important region in the world for income, after North America. Within Europe, Scandinavian countries have seen a dividend boom, while those worst hit by the euro crisis are returning far less to their shareholders than they did five years ago. France is the most significant country, contributing a quarter of the region’s dividends ($50.5bn), though in dollar terms, its total payouts are flat since 2009. Germany contributes less than its economic power would suggest, owing to a less developed equity culture, but its growth rate is double the region’s average over five years.
The US has increased its payouts 49% over five years, and is by far the largest source of dividend income ($301.9bn), accounting for one third of the global pie. The UK’s share (at 11%) is disproportionately large compared to the size of its economy. UK payouts have grown in line with the global average (+39%) since 2009. Japan is up 29%, though the devaluation of the yen has pushed the 2013 total ($46.4bn) below the 2012 level.
From an industry perspective, the fastest growth in payout has come from the technology sector, more than doubling since 2009 (+109%) thanks in particular to Apple, which paid almost one sixth of global tech dividends last year from a standing start in 2012. For dividends technology is a relatively small sector overall, however. Financials pay the most, $218bn in 2013, almost a quarter of the global pie (24%) and have risen 76% since the post-crisis nadir. The oil industry, which has grown steadily, if unspectacularly, is a global dividend stalwart, providing $1 in every $7 of dividends in 2013. The mining sector, whose dividends doubled during the commodity boom, has slipped back over the last two years as that bubble deflated.
The top ten dividend payers, dominated by oil companies, banks and telcos, accounted for $97.1bn in 2013, equivalent to $1 in every $11 (9.4%) of the global total.
Despite the total payout reaching a new record, growth slowed to a crawl in 2013. Dividends inched ahead just 2.8%. In Q4, they actually fell year on year, dragged down by Japan, but also a drop in the US, where big special dividends paid in the last quarter of 2012 were not repeated. The strong US dollar against many currencies also reduced the translated value of dividends in 2013. The Henderson Global Dividend Index peaked at 143.9 at the end of September.
For 2014, Henderson Global Investors expects dividend growth to accelerate after the slower pace of 2013, with developed markets delivering better income growth than developing ones.
Alex Crooke, head of global equity income at Henderson Global Investors said: “Over the five year period of our research, dividends provide a clear picture of the major global economic events and trends. The rise of emerging markets, and their cooling, the inflation of the commodity bubble and its subsequent deflation, the Eurozone crisis, and the US resurgence from the recession are all there to be seen. The research also shows just how divergent the fortunes of different countries and different industries are. It also shows how areas that rank low in free float terms, especially emerging markets, are actually generating large amounts of income, often because governments with big stakes mandate generous payouts. The reliance on a few big stocks, though significant, is less at a global level than it can be in some countries, especially the UK. This means that a global approach to income investing can bring real diversification benefits. A disciplined, research-driven approach to stock picking can maximize the income investors earn from their savings.”
Table: Annual Dividends
Each year the HGDI analyses dividends paid by the 1,200 largest firms by market capitalization (as at 31/12 before the start of each year). Dividends are included in the model on the date they are paid. Dividends are calculated gross, using the share count prevailing on the ex-date, and converted to USD using the prevailing exchange rate. Where a scrip dividend is offered, investors are assumed to opt 100% for cash. This will slightly overstate the cash paid out, but we believe this is the most proactive approach to treat scrip dividends. In most markets it makes no material difference, though in some, particularly European markets, the effect is greater. Spain is a particular case in point. The model takes no account of free floats since it is aiming to capture the dividend paying capacity of the world’s largest listed companies, without regard for their shareholder base.
The model estimates dividends for stocks outside the top 1,200 using the average value of these payments compared to the large cap dividends over the five year period (sourced from quoted yield data). This means they are estimated at a fixed proportion of 11.3% of total global dividends, and therefore in the model grow at the same rate. This means the model does not need to make unsubstantiated assumptions about the rate of growth of these smaller company dividends. The market capitalization of stocks outside the top 1,200 was 12.9% in 2013.
All raw data was provided by Exchange Data International with analysis conducted by Henderson Global Investors.